The economy Ifo Institute raises growth forecast for Germany

More purchasing power, more exports, more investment - the German economy is slowly getting back on track. But there is still some way to go before the summer fairytale.

The Ifo Institute has raised its forecast for economic growth in Germany this year from 0.2 to 0.4 percent. "The German economy is slowly working its way out of the crisis," said Ifo economic director Timo Wollmershäuser in Berlin on Thursday. It is not yet a summer fairytale, but "new hope is emerging". Next year, the Munich-based institute expects economic growth of 1.5 percent.

The purchasing power of private households is increasing. Global trade and industrial production should continue to recover from the second half of the year. The easing of monetary policy will support investment, said the economic researcher. The Ifo Institute expects the European Central Bank to cut interest rates twice more this year.

Inflation on the retreat

Inflation is likely to fall further to 2.2 percent this year and 1.7 percent next year. However, the number of unemployed will rise from 2.6 million to 2.7 million this year. This corresponds to a rate of 5.9 percent.

Next year, the number of unemployed is expected to fall again to 2.6 million. The number of people in employment is expected to rise slightly from 45.9 million to 46.1 million this year and to 46.2 million next year.

According to the Ifo Institute, the government deficit will fall significantly from 99 billion to 73 billion euros this year and to 54 billion euros next year. The internationally criticized current account surplus is likely to rise from 258 billion to 312 billion and then 306 billion euros.

The other institutes, which together with the Ifo Institute prepare the joint forecasts for the German government in the fall and spring, presented their forecasts last week. They expect between 0.2 and 0.4 percent economic growth, 2.2 to 2.4 percent inflation and 2.7 million to 2.8 million unemployed people in Germany this year. The EU Commission expects the European economy as a whole to grow by 1.0 percent this year.